Transcription
In this free video course, you will learn everything you need to know about price action trading for trading stocks, crypto, Forex, or any other financial market. By the end of this course, you will not only become a better trader, but you will also be equipped with multiple price action indicators and tools to further improve your trading skills.
All right, so let's begin this price action course by taking a look at what you can expect to learn from this video. The very first thing we're going to take a look at is, of course, what is price action. And price action is, at least in my opinion, one of the most misunderstood concepts in trading. Do you really know what price action actually is and why it's so important in trading?
Next, we're going to take a look at some important candlestick patterns and candlestick formations. Your ability to understand candlestick patterns can improve both your entries but also your exit points, and as a result, taking better trades.
In the next chapter, we're going to talk about price action with support and resistance. And if you have been trading for a while, you are probably already at least a little bit familiar with support and resistance. But when we combine price action with support and resistance, we can get a much deeper understanding. We can start to understand, you know, what makes a support or resistance level strong, or what makes a support or resistance level more likely to actually break.
We're also going to cover price action breakout trading. So, breakout trading is one of the most popular ways to trade. In my opinion, it's a very fun way to trade because you get in and out of the market very quickly. So if you really understand breakout trading, you can make quick profits. But how can we combine price action with breakout trading to really improve our breakout trades? We will talk all about that in today's video.
Uh, of this chapter, we will talk also about something very important, and that is the importance of volume in trading. So, how does volume work? How is volume related to price action? We will cover everything you need to know about that.
And last but definitely not least, we will take a look at the best price action indicators uh in TradingView. And now you might think, isn't price action actually when we trade without indicators? Well, that is actually not really true. To understand this, let's take a look at what price action actually is.
All right, so what is price action? As I have already mentioned, price action is a misunderstood concept. And I think the most simple way to actually think about price, price action is that price action is about how the price is moving now. So, price action is when we really zoom in on the chart and take a look at what is the current candle doing, or what are the the last couple of candles doing. So, for example, on this image right here, price action is not about, you know, finding our support and resistance levels. Price action is more about how the price is reacting to said levels. So, for example, if you take a look at this reaction right here of support, you can see that it's very different compared to this reaction right here. And this reaction of resistance is very different from this little reaction right here. And price is about understanding these small details and how we can use these details to make better trading decisions.
And this right here is very important: Price action is micro, while market structure is macro. So, you might have heard of the term market structure before, and market structure is basically when we zoom out and take a look at the whole chart. This is where we identify, for example, trends, we identify our major uh support and resistance levels, swing moves, and pullbacks, and so on and so on. While price action is micro. Micro basically means that we really zoom in and take a look at the small details.
So now, when we have a very basic understanding of what price action actually is, we are ready to start learning about some important candlestick patterns and candlestick formations. And first of all, what are candlestick patterns? Well, candlestick patterns are one or multiple candlesticks that indicate either price reversals or price continuations. And here on the screen, you can see a few different examples of candlestick patterns and formations. For example, here on the left, you can see an example of a price continuation pattern. And the reason it's a continuation pattern is because before the pattern appeared, we had an uptrend. Then we saw the pattern right right here. This was actually a pattern consisting of five candles, and the goal of the pattern is to continue the trend towards the upside. So this is why this is a continuation pattern.
But if you take a look at the pattern here in the middle, you can see that before the pattern, we had an uptrend. Then the pattern appeared, and the goal of this pattern is to reverse the price to the downside. So this is an example of a price reversal pattern. The last pattern is a reversal pattern because we had a move towards the downside, the pattern appeared right here, and the goal of the pattern is to reverse the price up.
And candlestick patterns are an important part of price action trading. Remember that price action trading is when we really study the details of the price, and that is exactly what candlestick patterns actually do. We zoom in to a few candles, and these patterns give us hints of what the price will do next.
So now, let's right away dive in and take a look at two patterns that you really need to learn. And I'm talking about hammer patterns and shooting stars. And let's begin here by taking a look at the hammer. So this pattern right here to the left is a hammer. And the hammer pattern is a single candlestick pattern, meaning that it consists of only one candlestick. And there are a few rules you need to know about in order to correctly identify a hammer.
The first thing we need to know about is that every single candlestick have four specific price points. We have the open, so this right here is where the candle starts. We have the close, which is the level where the price is after the candle is done. We also have the low point, which is all the way down here. This is the lowest level the price has been during the candle. And we also have the high. This right here is the highest point the price has been during this candle.
And in order to identify a hammer, what you're looking looking out for is that you're looking out for a small real body. So this wide part of the candle is what we're calling the real body. And we also want to see a long lower wick. So the wide part of the candle is called a real body, and the small lines here above and below are called wicks. And for the hammer, we want the lower wick to be at least twice as large compared to the real body, but preferably we want the wick to be even longer, perhaps perhaps three times as large or even four times as large. You can see in this particular example, it looks like the wick is pretty much four times as large as the real body. In order to find a good hammer, you also want this upper wick to either be very small or not exist at all.
And now I want you guys to shift your attention and take a look at this price chart right here. And I want you guys to try to identify a hammer pattern. But before you do this, I can actually give you two hints. The first hint is that the hammer doesn't have to be green. The real body of the hammer can be either green or red. It's still a valid hammer. The next hint is that the hammer is a bullish reversal pattern, meaning that before the hammer appears, we want to see a downtrend. Then the hammer appears right here, and the goal of the hammer is to reverse the price towards the upside. And I can actually give you guys one more hint here: look look out for hammers close to the support level right here. So now, if you want, feel free to pause the video and do the exercise.
All right, so did you find the hammer? Well, the hammer pattern is right here. As you guys can see, it has a small real body. You can also see that before the hammer appeared, we had a downtrend. We saw the hammer, and after the hammer, the price reversed to the upside.
The next pattern I want to take a look at is the shooting star. And here to the right, we actually have an example of a shooting star. And as you might notice, the shooting star is very similar to the hammer. It's pretty much the hammer, but upside down. So for the shooting star, we still want to see a small real body, but in this case, we want to have a long upper wick. And the upper wick should be at least twice as large as the body, but I really prefer it when the wick is three times as large or even four times as large. And once again, again, you want to see either little or no lower wick at all. The color of the body can be either green or red. Both of these colors create valid shooting stars, but you know, one could argue that a red color is a tiny bit more bearish, but it isn't super important. And because this is the opposite of the hammer, the shooting star is a bearish reversal pattern. So before the shooting star appears, we want to see an uptrend. Then we see see the shooting star right here, and the goal of the shooting star is to reverse the price to the downside.
And now, if you want to, you can once again look at this chart and try to see if you can identify a shooting star. So if you want to, you can pause the video right here. But in this case, we can't really find any valid shooting star. And why is this the case? Well, if you look closely here, you can see that we have a few candles that look like shooting stars. For example, right here, you can see that we have a candle that is pretty much looking like a shooting star. Right uh, and you can also see, for example, right here. This is also pretty much looking like a shooting star. But the reason these two candles are not valid shooting stars is because in order to have a valid shooting star, we need to see an uptrend before the pattern appears. And in both of these cases, we actually see a downtrend before the shooting star appears. So it's not really a valid shooting star. I would actually say that the only valid shooting star is this red candle. I hope you can see it. This red candle right here. Uh, it's a very good-looking shooting star, and it actually comes after a tiny, tiny bounce here. But because the upwards movement before the shooting star appeared was so small, this is still, at least in my opinion, not a great shooting star.
All right, so the next pattern I really want you guys to learn here is the engulfing pattern. And I actually forgot to mention, you know, why it's so important to learn about the hammer and the shooting star. And that is basically because these patterns happen so often, and they also can provide very good signals. And this is also true with the engulfing pattern. The engulfing pattern happens all the time, and it can actually give some pretty strong signals. So both the engulfing pattern and the hammer and the shooting star are, you know, super valuable and pretty easy to learn. So I really think it's important to master these patterns.
And for the engulfing pattern, we have two different different versions. The first version is called the bullish engulfing pattern. And this right here is a bullish reversal pattern. So before the pattern appears, we want to see a downtrend. And the goal of this pattern is to reverse the price to the upside. And the engulfing pattern is a two-candlestick formation. So it consists of two candles. We have candle one right here, and we have candle two right here. And for the bullish engulfing pattern, candle one here is a red candle that appears after a downtrend. And that is pretty much all you need to know about the first candle. The second candlestick here is more important because we want the second candle to either open at the same level as where the red candle closed. So the red candle closed right here, and we want the second candle to either open at this level, or actually open below this level. To have a classic bullish engulfing pattern, we actually want the uh green candle to open below here. But this will actually not happen on many types of charts because in order to to be able to open under the close of the previous candles, we need a chart that is able to create gaps. And this is not true for all charts. So think about it as either at or slightly below the close of the previous candle. But here, and this is the most important part, the second candle right here, here should close above the open of the previous candle. And this is very important. So we need to create some distance here between the close of the green one and the open of the red one. And it is when the green candle closes the bullish engulfing pattern is confirmed.
And the candle to the right here is the bearish engulfing pattern. This is of course the opposite of the bullish engulfing. So this is a bearish reversal pattern, meaning that before the pattern appears, we have an uptrend, right? And the goal of the pattern is to reverse the price to the downside. And in this case, the first candle is a green one that comes after the uptrend. The second candle is a red one. The red candle opens at or even above the previous green candle, but the most important part here is that we see a close. The red candle closes below the open of the green one. That is the most important part here.
And now I want you guys to try to identify a bullish engulfing pattern and a bearish engulfing pattern. So if you want, feel free to pause the video right now and do the exercise.
All right, so did you guys find the patterns? Well, let's take a look here together. The first pattern, and the bullish engulfing pattern, we can clearly identify is this pattern right here. And you can see that this was an extreme example of a bullish engulfing pattern. And first of all, you can see that before the pattern appeared here, we had a downtrend. Candle one here is a red candle that comes after a downtrend. And the next candle right here was a monster green candle. You can see in this case, the candle clearly opens below the close of the red one, and very, very clearly closes above the open of the red candle. So this candle clearly engulfs the previous red candle. And that is, by the way, why why it's called the engulfing pattern because the next candle sort of engulfs the previous candle here. And another important thing I want you guys to notice here is that the pattern, the bullish engulfing pattern appeared here at an important support level. You can see the price bounced here before, then the price came back, and we saw a bounce once again. And if you remember the hammer pattern we talked about earlier, which is all the way down here, this pattern also came in at a key support. And that is very important. When we see candlestick patterns coming in at key support or resistance levels, the patterns become more strong. So this is actually an example when we combine market structure and price action.
And also, guys, did you manage to find any bearish engulfing pattern? Well, this example is much harder to spot here, in in my opinion. But as you can see right here, we actually have a bearish engulfing pattern. And the reason this one is hard to spot here is because the first candle is actually something we call a doji candle. And we will talk more about doji candles soon. But we had a doji candle, but the next red candle here clearly opened above the real body of the doji, and clearly closed below. So the red candle engulfs this very, very, very small real body right here. This is a bearish reversal signal indicating a reversal here towards the downside. And you can see that this uh candle right here, this bearish engulfing pattern was the start of a very strong move here towards the downside. But here we can actually also argue that we have two more potential uh bearish engulfing patterns right here. We have a bearish engulfing, right? It comes after an uptrend. The red candle opens at the close of the previous green one, and clearly barely closes below. And you can see that this bearish engulfing pattern led to a sharp drop in the price. But we also have a pattern that failed. You can see this right here. Isn't that also a bearish engulfing pattern? And yes, guys, this is true because the pattern opened here at the same level as the green one, even a little bit above, and closed below here. But you can see that this pattern immediately failed here, and the price continued towards the upside. And you may, of course, want to wonder why did this pattern fail? Well, first of all, not all patterns will be successful. And the other reason here is that we didn't really have anything to support the the pattern. So, for example, at this level right here, we don't have any clear support or resistance level. So there's not really a clear reason for the price to sharply reverse here. If we take a look at the other engulfing we talked about earlier, the engulfing right here, we can actually see that this one came in at, you know, a potential resistance, right? You can see the price reacted right here. But in this case, we didn't really have any market structure supporting a reversal.
But now, guys, the time has come to talk about a very important family of candles, and that is the doji candles. Stakes. And as you guys can see here, we have many different slight variations of the doji candle. But the important part about the doji is that the open, so remember the candle starts right here, and the close are pretty much at exactly the same level. So, for example, here for the long-legged doji, you can see that the candle opens right here, it reaches a lowest point all the way down here, it reaches a highest point all the way down here, but the candle closes at the exact same level where it opened. The same thing is true for all of these candles. So even for the dragonfly doji here, you can see that the price opened right here, during the candle, it fell all the way down here, it came up, and it closed at the same level.
And now let's take a look at what do these uh candlesticks actually tell us about the price. And let's begin here by taking a look at the classic doji. And the classic doji actually signals uncertainty. Because let's think about this: the candle opened right here, during the candle, it went down all the way down here, it also went up, and it went down. So as you guys can see, this candlestick signals uncertainty. The price is confused. It doesn't know if it wants to go up or down. Neither the bulls or the bears are in control during this candle.
The next candlestick, which is the long-legged doji, can actually be a little bit bullish or bearish depending on where the body is. So depending on where this line is right here. So the closer this line is to the highest point of the candle, the more bullish the candle is. So let's, for example, say that this line is all the way up here, then the candle opens here, during the candle, it went all the way down, but before the candle closes, it managed to push the price all the way up here. And this signals that the bulls have slight control. But for example, if the if the body instead were all the way down here, then you can see that it opened here, during the candle, it went all the way up, but before the candle closed, the bears managed to push the price all the way down here, signaling a bit of bearish control. So this long-legged doji can be a little bit more bullish or bearish depending on where the body is.
The next candle, which has a pretty cool name, it's the dragonfly doji. Uh, if you understand the previous candle, you will probably understand if this one is bullish or bearish. Uh, and this one is bullish. And the simple reason for this is because the price opened all the way, all the way up here. During the candle, the bears managed to push the price down all the way to this point, but before the candle closed, the bulls took control once again and pushed the price all the way up to where it started. So this signals that the bulls are in control.
The next candle is simply the opposite of the dragonfly doji. And the opposite of bullish, what is that? Well, it's bearish. So the candle opened, the bulls took control right away and pushed the price all the way, all the way up here. But during the candle, the bears took control here and sharply reversed the price all the way down here.
The last candle is a pretty funny one. It's called the four-price doji. And this one is actually very, very, very rare. So to be honest, it's not super important that you learn this. This uh doji, but it can still be fun to, you know, uh, why not learn more than enough. And this one is of course uncertain. H, the reason for this is that during this candle, it opened here, during the candle, it didn't move at all, and it closed at the same level. So nothing has happened about the price. And if n, if nothing happens, this is of course uncertainty. It doesn't give us any information about the price, uh, other than that, you know, the price is staying at the same level.
All right, so now when we know about doji candles, it's time to learn about what is pretty much the opposite of doji candles, and that is something called momentum candles. And first of all, what is a momentum candle? Well, momentum candles are single candlesticks with a body, or in other words, a real body, more than twice the size of the previous ones, or in other words, more than twice the size of the previous real bodies. So let's right away take a look at an example. If you take a look at the chart here to the right, you can see that right here, we have a momentum candle. And why is this a momentum candle? Well, we can clearly see here that the real body of this candle, so this length right here, the body is clearly more than twice the length of all of the previous candles. In this case, we can see that the real body was perhaps, you know, three times larger, or even four times larger compared to the previous candles. So this right here was a strong momentum candle. And we say that the candle is bullish because it was a green candle. But here, if we instead look at the chart here to the right, we can clearly see that we have a strong bearish momentum candle. The reason it's a momentum candle is because this massive, massive real body, you can see this length right here, is clearly more than twice the size of the previous candles. And we say that the candle is bearish because it's pushing the price to the downside.
And here, and this is very important, so these candles are important because they signal full bullish/bearish control. And also, momentum candles often lead to continued momentum. So in both of these examples, you can see that after the momentum candle appeared, we saw an acceleration in the movement. So after this uh green candle right here, you can see that the trend really started to pick up. And the same thing is true with the bearish example. After this strong momentum here, we can see that the steepness here of the D of the downtrend increased. And of course, guys, this will not always be true, but many times when we see these momentum candles happen, it basically signals that something is starting to become different about the market. Something happened on this candle. And to make these candles even more significant, uh, we need to talk about something called volume. And I will talk about volume later on in this course. Uh, but for now, what you basically, what all you need to know is what a momentum candle is. So think about momentum candles as, you know, at the very, at least two times as large, but preferably we want to see, you know, 3x or even 4x the size of the real body compared to the real bodies of the previous price movement.
All right, guys, so now we know quite a bit about candlesticks. We have learned about doji candles, momentum candles, and also some specific patterns such as the hammer, shooting star, uh, bullish and bearish engulfing patterns, and so on and so on. So now we are finally starting to get ready uh to talk about combining price action with other concepts. And the first thing I want to talk about is price action with support and resistance. And let's start off here by defining support and resistance in very simple terms. Support and resistance are uh price levels on the chart where the price is likely to reverse. And I like to think about all support and resistance levels as potential support and resistance. This is an important sort of uh mindset shift you can think about because not all support and resistance will always hold. But when we combine support and resistance together with price action, we can get insights into how strong the support or resistance level is. So, as I said, combining S&R, or in other words, support and resistance, with price action provides deeper insights into the strength of these levels.
And right here, you can see an example of a support and resistance level. We have the upper line here, which is the resistance level. The resistance level is the level on the chart where the price is likely to reverse to the downside. And the opposite is true for the support level. That is the level on the chart where the price is likely to reverse and bounce to the upside. And in this specific case, when we have the price sort of going up and down here between a support and a resistance level, uh, this right here is what we call a trading range.
So now, then, let's take a look at how we can use price action to find strong support/resistance levels. So, as I said, we can use price action to determine if a support/resistance level is strong. And what are some key signs to look out for here? Well, one thing I really like to look out for is momentum candles moving into and away from the support level often indicates strength. So, as you guys can see on this example, if you take a look at this move right here, you can see that we clearly have one, two, and three momentum candles coming into the resistance level. And we also saw a very strong bearish momentum candle moving away from the resistance. So when we see a sharp move up to resistance and a sharp move away, this makes the resistance level more likely to be strong, or in other words, it's more likely that this level will act as resistance once again in the future.
And if we take a look at this example, you can see that the price right here came up to the resistance once again. And what happened when we reached the resistance? Well, you can see that the price came up pretty much exactly to the resistance level, and we got yet another strong reaction. And this right here is important because let's imagine that this move was not a strong move. Let's imagine that before this resistance level, the price was moving something more like this. It was going pretty much sideways, and maybe up to the resistance like this, and it didn't move away from the resistance in a strong manner either. If we see a sort of price movement when the price is slowly crawling up to a resistance level and slowly crawling down, it will actually be easier for the price to push above that resistance, um, in the future. And the same principle is also, of course, true with support levels. So in this example, we can see that we did see a, you know, pretty strong move here into the support. This example is not as clear as the previous example, but you can still consider these red candles right here, at least the first two, you can consider as momentum candles. And the price also got reacted pretty sharply. Uh, but this one was, as I said, it's definitely not as clear as this uh reaction right here. But this is still considered, in my opinion, a pretty strong reaction. And what happened when the price came down to this level? Well, you can see that during this candle right here, the price quickly came down to the support and then bounced up. And also, guys, you are probably by now familiar with this type of candle. This right here is a hammer candle. And when we see a hammer appearing at support, that is definitely a bullish sign. And by the way, I forgot to mention this, but what is this candle right here? Well, it's a bearish shooting star. That is also a candle we have been talking about. And after this shooting star, we saw a sharp reversal to the downside. And even though this hammer right here, because it has a small real body, it's not really considered a, you know, momentum candle, uh, but here we need to be a little bit flexible and think about this candle. This candle right here was was still a very strong reaction because, as you can see, the price came down and then sharply reversed to the upside. So this is still a strong, a strong reaction of support. And that that means that it's more likely that the price will bounce, bounce once again. And as you guys can see, when the price came down to the support, we actually saw yet another bounce.
So now, when we know how to identify strong support and resistance levels, it is at least as important to be able to identify weak support and resistance levels. We need to know when a support or resistance is likely to break. So to repeat, we can also use price action to determine when a support or resistance level is likely to break. So what are the signs we can look out for here? Well, one thing I'm looking out for, and this is very important, uh, the creation of lower highs when approaching support, or higher lows when approaching resistance, signals weakness. And if this sounds a little bit confusing right now, don't worry, because we will take a look at an example right away.
So if you take a look at this chart, you can see that first of all, we saw a very strong, you know, multiple momentum candles. We saw a strong move coming down to the support, and we also saw a relatively strong reaction. And since we saw a strong move into and away from the support, that is actually a good, good sign and indicates that it's likely that this support will hold in the future as well. So, as we can see, then the price came down almost to the support, we saw a little bounce. The price came down again, pretty much exactly to the support level. But if we take a look at this next bounce right here, if we take a look at this bounce, we can see that the bounce is clearly weaker. And what you also can see here is that the highs, you can see we have one high right here, after the next bounce, we have a lower high. The third bounce right here, we have an even lower high. And this is what I mean when I talk about lower highs when approaching support signals weakness. Uh, if we take a look at the next bounce, you can see that, you know, we saw a little bounce with an even lower high. And after this, the price started to crawl here very close to the support, and then we finally saw a strong breakdown. And this is a very good sign to look out for. When you see lower highs coming into support, it actually signals that the support is getting weaker and weaker, and that a breakdown is pretty likely to happen soon.
Another super interesting thing about this price action concept is that if we take a look at this chart as a pattern, we can actually see that this pretty much looks like a descending triangle pattern, right? And if you have been watching my chart patterns trading course, you know that this is a pattern that comes after a downtrend and it indicates a continuation to the downside. And this is a cool thing about price action. If you learn price action principles, you will be able to identify chart patterns without really thinking about the chart patterns. You can basically get a deeper understanding of why chart patterns work as they do. But if you guys are interested in diving deeper into chart patterns, I actually have a 1-hour long chart start patterns course here on YouTube. So if you guys have the time, I highly recommend you guys to watch that video when you are done with this price action trading course. I will make sure to leave a link to that video somewhere up in the corner in the eye. But all right, so now when you know a little bit about how to combine price action with support and resistance, now we are finally ready here to take a look at price action breakout trading.
Let's first take a look at what a breakout is in the first place. Well, a breakout in trading is when the price moves beyond, or in other words, breaks a clearly defined support or resistance level. And as you can see on this example right here, we had a resistance level. You can see the price reacted multiple times right here. We saw yet another reaction right here. And with this momentum candle right here, we saw a strong breakout. And after the breakout, we saw a very, very sharp movement towards the upside.
One interesting side note I have to mention here is that before the breakout appeared, what happened? Well, we saw a low right here, and then we saw a higher low. And as you know from the previous example, when we start to see higher lows getting closer and closer to a support or resistance, it's more likely to break. So you can use the principles we talked about recently uh to improve your breakout trading as well.
But now, then, what are some signs of a good breakout? This chart you can see right here to the right is a very famous example of a breakout that had, you know, pretty much all the signs we're looking out for. And we're going to take a look at that example very soon. Uh, but first, let's take a look at what are the signs of a good breakout. First of all, what we want to see is that we want to see increased momentum. So when the price breaks our support resistance, we want to see strong momentum. The second thing we're looking out for is that we want to see a strong candle close above the support or resistance. And in very simple terms, the candle close is basically when the candle closes and when the next candle starts. And in order to have a good breakout, we want to see preferably the candle closing quite far above the resistance or quite far below the support. That is yet another uh sign to look out for. The third sign we're looking at out for is actually increased volume. And this is very important. And later on in this course, we will take a look at volume more in detail. Uh, but for now, all we need to know here is that we need to see increased volume. The fourth sign here, and this one is actually very important, is that we want the support and resistance level to be obvious, or in other words, good breakouts often happen when we break a support or resistance level that is clearly visible on the chart. Preferably, we want the support or resistance level to be a level that, you know, pretty much all traders can see, because this will often increase the trading activity associated with the breakout. Uh, the fifth point here is that we also preferably want some sort of price action confirmation. And I will talk more about that very soon.
All right, guys, so now let's take a look at the famous breakout example I talked about. And when I talk about this example, I want you guys to have all of the points I just recently listed up in mind. Um, so right now, we're looking at Bitcoin on the daily chart. And the breakout I'm talking about is this move right here. And if you only look at this chart right here, you may think, you know, what was so special about this breakout? Well, remember when I said that one thing we're looking out for when we're looking out for strong breakouts is that we're looking out for levels that are clearly visible to everyone. And this level that Bitcoin broke was actually the old all-time high from all the way back here in 2017. You can see we saw one very strong reaction, we saw yet another very strong reaction. So this level right here at around 19,700 was clearly, clearly visible to every single trader. So we clearly have that sign. Uh, but what about all the other signs of a good breakout? Well, point number one, remember point number one was that when we break the level, we want to see increased momentum. And if you take a look at this candle right here that broke the level, you can see that this is clearly, clearly a momentum candle. Why is this a momentum candle? Well, the candle is so much larger compared to the previous candles. So we definitely saw a strong increase in momentum. Point two, point two was that we want to see a strong candle close above the level. And if we take a look at this candle right here, where did the candle close? While the candle closed all the way up here, which is far, far above the resistance. And this is exactly what we're looking out for. We want the candle to clearly close above, or in other words, we want it to close high above the resistance. The third point we're looking out for was all about something called volume. And what we want to see here is increased volume. Uh, so now let's really quick open up the volume indicator. To do this, you go up here to the indicators tab in TradingView and then you simply search for volume. And I want to keep this very simple. As you can see, we have many different volume indicators, but we just want to open up the simple volume indicator. This one is just called volume. And now let's take a look at the breakout here. Uh, so if you take a look at the breakout candle, the candle right here, and then we look down here to the volume. Right, in simple terms, the length of the bars here, the length of the volume bars tells us how much volume we had on that particular candle. And as you can see, when Bitcoin broke out, this was the highest volume bar Bitcoin had seen in a very, very long time. And that is a, that is a great sign of a strong breakout. And as I have been saying, I will talk about more in depth uh about volume later on in this course. But for now, let's just notice that when we have lots of volume on a breakout, that is a good sign. And what about the last sign of a good breakout? Well, the last sign is something I call price action confirmation. And this one is can be the most uh tricky one to sort of trade based upon. Uh, but what I'm essentially looking out for here is that after the candle close, we preferably want to see follow-through. So if we see a candle close like this, and then right away see a strong red candle, that would of course be a bearish sign. But if we see a follow-through candle, so the price continues to push higher after the strong momentum candle, that is yet another good sign. And as I said, guys, this was a perfect example because after this breakout, you can see the price just completely exploded here towards the upside. And you have to notice here that definitely not all breakouts will be this perfect. Not all breakouts will have all the five positive signs of a breakout. But in general, the more of these signs you see, the better. But please, guys, feel free to take a screenshot of this picture right here and use it as a checklist for your breakout trades.
But now, guys, it's of course important to be able to spot good breakouts, but it's also super important to be able to identify the signs of a failed breakout. If you didn't know, failed breakouts are actually a super common trading strategy. So if you get really good at identifying failed breakouts, you can both improve your breakout trades, but you can also become a better failed breakout trader. So let's take a look at the signs here of a failed breakout. And after this, we will also take a look at a famous example of a of a failed breakout. Uh, but as for the signs here, uh, the first sign we're looking out for is decreased or similar momentum. So if we break a level, but the momentum is not increasing, that is a sign that we might be talking about uh, a failed breakout. The next sign we're looking out for here is a weak candle close, or even wicks above or below the level. So if the candle just closes slightly above the level, or if the candle simply wicks above and then quickly dips below the resistance, or the opposite for support, that is a sign of a failed breakout. The third point here is that we're seeing no increase in volume. So perhaps we are seeing a pretty strong breakout, but if the volume is not following, that might be a sign of a failed breakout. That alone doesn't mean that we have a failed breakout, but the more of these points that we stack together, uh, the more likely that we're seeing a failed breakout. Uh, the next point here is that the level is minor or not clearly visible on the chart. So remember from the Bitcoin example, that level was the most obvious level on the whole Bitcoin chart. So that made it a very good trading opportunity. But if the level is, you know, hidden or not clearly visible, this can be a bad sign. Last but not least, uh, we're talking about no clear price action confirmation.
So now, guys, let's take a look at an example of a failed breakout. And once again, in this example, it actually shows a level that is super clearly visible on the chart. So if you take a look at this gold chart right here, you can see this level uh at around uh 270 was the all-time high that gold printed all the way back here in August 2020. We saw another strong reaction here, um, this was in March 2022. We saw yet another reaction at this level here in May 2023. But then at this point right here, and remember the first sign of a failed breakout is decreased or similar momentum. And as we can see here, the first, the green candle here that pushed all the way up to the level, uh, was actually a strong bullish momentum candle. So it started off good. But the reason that wasn't a breakout at all was because, as you can see, the candle right here did not close above the resistance. So that was not a valid breakout. And if we take a look at the next candle, this was an extreme candle. You can see that the price during the candle, we saw all the signs here of a strong breakout. The price pushed all the way up here, but before the candle closed, the bears came in and pushed the price all the way down there. So what we saw here was that the momentum shifted from strong bullish momentum to strong bearish momentum, or in other words, we saw decreased momentum. And that is a strong sign of a failed breakout. The other sign of a failed breakout is that we either have a weak candle close above, or that we are seeing wicks above or below the level. And in this case, you can see that we had a massive, massive wick right above the level. As for the volume, you can see that we actually saw increased volume. And this is a, you know, good sign of a breakout, right? Well, this is only true if we actually close above the level. If the price reverses like it did right here, and we see lots of uh volume, that actually makes the breakout even worse. We also had no price action confirmations.
So, the only thing we had going for us, uh, on this breakout was that we had a clearly visible level. But what you also can see here is that the price came up to this level once again, right? And we tried yet another breakout. But in this case, we had: one, we had no increase in momentum; two, we had no clear candle close above the level; three, we had no strong increase in volume; four, the level is still, still clearly visible, so that is something we still have going for us. But five, we had no price action confirmation. So, in this case, four out of five signs were bearish. So, this is yet another sign that the breakout will fail. And indeed, the breakout failed here.
But guys, if we look a little bit to the right here, we can see that the price eventually broke above here. We saw a beautiful breakout. We saw increased momentum, strong candle close, and all that good stuff. So, now it's finally time to dive a little bit deeper into volume trading. When we combine volume and price action, this becomes a very powerful tool. But let's begin here by taking a look at what volume is in the first place.
So, what is volume in trading? Well, in very simple terms, volume measures the number of stocks, cryptos, or Forex pairs traded during a given time period. So, for example, if this chart right here is a daily chart, meaning that every candlestick here on the chart represents one day, then each volume bar, so each bar down here, will represent the number of stocks or cryptocurrencies or whatever we're looking at that was traded during that day. But if you, for example, have a one-hour chart, then the volume bars will represent the number of stocks or cryptocurrencies traded during that hour. If we have a five-minute chart, it will represent the number of stocks or cryptos traded during that five-minute candle, and so on and so on.
And now, let me show you guys super, super quick here how to add the volume indicator here to TradingView. So, what you want to do, you open up a clean chart in TradingView, then you go up here to the indicators tab, and what you simply do here is that you search for volume. And as you can see, when you search for volume, you will see tons of different indicators appearing here. But the most common and most simple volume indicator is called volume, right here. So, you can feel free to start this indicator, and we want to open this one up. And now, as you can see, the volume indicator has appeared here on our chart.
But now, let's continue here and let's talk about what volume reveals about the price, or in other words, what information can volume give us about future price movement? Well, first of all, we need a way to think about volume and a mindset shift that really helped me in the beginning is to think about volume as how many buyers or sellers are supporting the move, or how many buyers and sellers are behind the price movement. And this means that a price action signal is stronger and more reliable when supported by high volume.
So, for example, let's take a look at the chart to the left here. This was an example of a price action signal we talked about earlier in the course. But now I want you guys to imagine that we have two different scenarios with this price action signal. So, in one scenario, during this candle right here, we imagine that we have a very small volume bar. And in the other scenario, we imagine that we have a very large volume bar. So, we can, for example, imagine that during the large volume bar, we had 100,000 volume, but during the small volume bar, we only had 100 volume. And let's think here, which one of these volume bars is more bullish? Well, if we think about this as how many buyers are supporting the move, we can see here that during the first volume bar, uh, only 100 buyers supported this move right here. But during the larger volume bar, so during this bar right here, we had 100,000 buyers supporting the move. And when we have more buyers supporting the move, it means that more market participants are agreeing that this is a valid move. And this makes this volume bar right here more bullish.
And the same thing is also true when we, for example, talk about breakouts. So, remember the breakout right here. In order for the breakout to be more significant, what we want to see here is that we want the volume bar during the breakout candle to be larger compared to the previous volume bars. So, if the volume, for example, looks something like this, this right here is a very bullish sign. But if you imagine the volume looking more perhaps something like this, you know, the volume during the breakout was pretty much the same as the other volume bars, this makes the breakout a little bit less significant and more likely to fail.
And you can apply this principle to other concepts as well. So, if you, for example, take a look at this image right here, you can see that we have one uptrend here to the left, and we have another identical uptrend here to the right. But the difference here between these two charts is that for one chart, we see increasing volume, or in other words, more and more buyers are supporting the move. But in the other example, we can see that the volume is decreasing, which means that less and less buyers are supporting the move. And because of this, the chart to the right here is a little bit more likely to actually fail compared to the chart to the left.
So, to summarize, using volume together with your price action signals can improve the reliability and confidence behind the signals and patterns.
So, now guys, the time has come to talk about some of the best price action indicators. And as I have already mentioned, it's a sort of common misconception that price action is all about trading without indicators. This is not really true. In very simple terms, price action is when we zoom in and take a look at the small parts of the charts, or in other words, how is the price reacting right now. While sort of market structure is when we zoom out. So, when we talk about price action indicators, we're often talking about sort of how the price is moving right now.
And the indicators I'm going to talk about in this chapter is: first of all, I will talk about an indicator that you can use to find candlestick patterns automatically. And this is an amazing indicator in TradingView that I really think all of you guys should learn about. Uh, the second indicator we will talk about is an indicator that automatically finds trend channels, but also finds the moments on the chart when we see trend channel breakouts. After this, we will also cover an indicator that finds trading ranges and breakouts. And last but definitely not least, we will take a look at a premium indicator.
All right, so let's begin here by taking a look at our first indicator. And we are, as you can see, we are currently looking at Tesla here on a daily time frame. And to open up the indicator, what we want to do here is that we want to navigate up to the indicators tab here in TradingView. Uh, and then we want to search for, you want to first do a star like this, and then you want to search for "all candlestick". Uh, and then you want to search for "all candlestick patterns" and a star like this. And for this indicator, if you use another language in TradingView, you might need to search for this in your own language. Uh, I have been getting a few comments here that people have trouble finding these indicators. But if you have TradingView in indicators, you should be able to search for "star all candlestick patterns". And the indicator we want to open up is this indicator at the top right here. If you want to, feel free to start this indicator. But now let's open this one up.
And now, as you guys can see, we have a few signals appearing here on the chart. And what does these signals mean? Well, "BE" stands for bearish engulfing pattern. And remember, this is a price action signal we have been talking about earlier in the video. And a bearish engulfing pattern indicates a reversal to the downside. Um, the, uh, gray signals right here, where it says "D", stands for doji. And remember, we have been talking about dojis as well. Dojis basically signal uncertainty, or it depends a little bit on how the doji looks like. Uh, and when we change the settings of this indicator, we can actually include many different dojis, and we will talk about that soon. Uh, but you can also see that right here, we have a, a blue signal that stands for bullish engulfing pattern. And remember that this is a pattern that comes after a downtrend, and the goal of this pattern is to reverse the price here to the upside. And bearish and bullish engulfing patterns are great patterns, and I recommend you guys to keep this on the indicator. Uh, but now let's actually go up here to the settings tab for the indicator. So, we go up here and we press on the cog wheel where it says settings right here. And as you can see, if we scroll down, you can see that you can choose pretty much any candlestick pattern you want this indicator to automatically identify. So, the standard settings here is to use the abandoned baby, the doji, dragonfly doji, and so on and so on. And the patterns I sort of recommend here, at least for beginners, uh, and these are patterns that appear all the time, definitely include the engulfing pattern, definitely include the hammer, and we are also looking out for, remember, the shooting star. Uh, so the shooting star we have down here. I'm going to make sure to choose this one. Um, and as you guys, uh, if you guys want to, you can definitely include more patterns as well. I actually have a full one-hour plus long course about candlestick patterns. Uh, so if you guys want to learn more about candlestick patterns, I highly recommend to check that course out after you have watched this video. I will make sure to leave a link to the course somewhere up in the corner in the eye.
So, here you can choose between patterns. And also at the top here, we have something called "Detect Trend Based On". And this is basically a filter. So, so right now, the indicator uses a simple moving average, SMA 50, which means that it's a simple moving average that bases its calculations on 50 days. And I actually recommend to keep this setting because if we use no detection, you will realize that we will get many more signals here on the chart, and many of these signals will be false. Because when you have no detection, the indicator will use no filter, and you will get many signals. So, I actually do recommend to keep the SMA 50 right here. You also have a SMA, uh, 50 combined with SMA 200, but this one tends to filter out a bit too many, in my opinion. So, I'm going to keep it at 50 right here. But you can definitely try, uh, you can definitely mess around and see how SMA 50, SMA 200 works for you. You can also here on "Pattern Type" decide if you only want to show, for example, bullish patterns, or only want to show bearish patterns. But I recommend to keep this one at both.
And another important thing to notice about indicators in general is that we pretty much never want to use the indicators alone. Bys, what we do want to do here is that we want to combine the indicators with other technical analysis tools. So, for example, if you take a look at this bearish engulfing pattern right here, we can actually see that the pattern appears here. You can see we saw some resistance coming in, the price came down, we came up, and pretty much tested the resistance right here. So, for example, this bearish engulfing pattern becomes a little bit stronger because it appears at a key resistance. What we can also of course use is that we can use sort of short patterns here. For example, here we have a sort of upward sloping channel. Uh, so one could wait for confirmation right here. But the point here is that you don't want to rely on one single indicator. You want to use price action signals, you want to use market structure as well.
And now guys, let's take a look at our second indicator. And to open this one up, we once again go up here to the indicators tab in TradingView. And now what you want to search for is "Chart Prime". Uh, this is a creator that, as you can see, have created many, many different indicators. Uh, some of these indicators very useful, some of these indicators not very useful. Uh, but still, I shout out to Chart Prime for creating all of these indicators. But the indicator we want to use here is called "Channels with Patterns". Uh, so as you can see, this indicator right here called "Channels with Patterns" is the one we do want to open up. So, let's open up this indicator right here. And now we can close out the indicators tab.
And as you can see, guys, now on the chart, what this indicator basically does is that it automatically detects trend channels. Uh, so here we have a sort of short downtrend here. Remember, here we have a short uptrend. And this uptrend we actually identified, uh, by ourselves when we talked about this bearish engulfing pattern. Um, but one very interesting thing about this indicator is that we not only get the channels, but we also get signals here where the channels break. So, as you can see here, it says "breakdown" because this short-term channel right here broke to the downside. And here, here, this is very interesting because you can see we still have our candlestick indicator on the chart. So, here we saw a bearish engulfing pattern happening very near the bottom of the channel. So, what you could do in this example is to actually wait for the breakdown, right? So, wait for the break of the channel before you enter the trade. So, in this case, we can actually combine the candlestick pattern with a sort of break of some sort of market structure right here. And then we at least combine two technical variables at the same time. Um, but now let's go up here and take a look at the settings tab. We have tons of different settings we can mess around with here. For example, uh, this one is pretty important, the "pivot length". Uh, will basically decide how the indicator calculates these channels. But going over all of these settings, you know, step by step, would take too much time, time, for this, for this video. Uh, but I can talk about some settings here. Uh, for example, here at the top, we have some presets. These are basically, uh, preset settings that is made by Chart Prime. Um, so, for example, if you trade stocks, you can use the stock preset. If you trade Forex, you can use the Forex preset, and so on and so on. I don't really know how Chart Prime have, uh, decided the settings because, you know, different stocks can behave super differently, and the same thing is true for Forex. So, what I always recommend is to try out different settings and see what works best for you. You can also here at "Style", you can decide to choose, um, that the channels are based on the candlestick bodies or the candlestick wigs. These are also two different settings you can decide between. And here you can also choose what type of signal we need in order for the channel to break. So, are we basing the breaks on candlestick closes, or are we basing the breaks on highs and lows? The high-low setting here is a bit more conservative, while the close setting here will confirm the breakouts a bit earlier.
So, now guys, let's take a look at the third indicator. And for this example, I have switched the chart to a Bitcoin daily chart right here because I found a nice example demonstrating both the bearish and the bullish, bullish example for this indicator on the same chart. But to open up this indicator, we once again, we head up to the indicators tab. And now we want to search for "LuxAlgo". Um, this is yet another sort of famous creator of indicators here in TradingView. You can see we have tons of different indicators. Uh, but the indicator we want to use here is the indicator called "Range Detector". So, "Range Detector" here by LuxAlgo. Uh, we want to open this one up.
And as you guys can see, now multiple trading ranges have appeared here on the chart. So, this indicator is, uh, pretty similar to the previous indicator, but instead of detecting trends automatically, this indicator detects trading ranges automatically. And trading ranges are basically sort of horizontal trends where the price is going sideways, defined by a support and resistance. And how does this indicator work? Well, first, the indicator needs some data. So, we need quite a bit of data in order to confirm that we have a trading range. In this case, you can see the sort of gray line right here that goes vertical. This is the point where the indicator has detected the range. So, as you guys can see, from this point, the range is detected. But what this indicator also tells us is that they give us a signal when the range breaks. And when the range breaks, you will see that the color of the horizontal lines will shift color. When the trend breaks to the upside, the line will shift to green. And when the, uh, range breaks to the downside, like right here, the color will shift to red. But once again, here to use the indicator, you preferably want to combine it with other technical variables such as price action signals. So, for example, if we take a look at this breakout right here, what you can notice is that before the breakout happened, you can see we had one low right here, then we printed a higher low, and then we printed yet another higher low. And remember from earlier in this video, when we see higher lows coming into resistance, this makes the resistance more likely here to break. So, this was another signal that made this breakout a little bit more likely to happen. And the same thing was pretty much true with this breakdown right here. You can see that before the break, break down appeared, we also saw, this is not as clear, but you can also see that the price started to print lower highs coming into the support, right, which also is a signal of weakness.
And once again here, let's take a quick look at the settings as well. This setting tab is much more straightforward than the previous indicator. So, first of all, for the first setting here, which is called "Minimum Range Length", um, this is pretty much what the name suggests. You can choose a number of the minimum length for a trading range. So, if you're looking for very, very short ranges, you can, for example, decrease this number to 10. However, when you decrease the minimum length with too much, you will find that you will get sort of many false trading ranges because the indicator only uses, um, you know, few candles as their data to detect their ranges. So, this is from my experience, not usually, uh, recommended. Uh, the standard number here of 20 is pretty good. But if you're looking out for more, uh, sort of stronger ranges here, you can use more data. So, if you, for example, use 30 here, you can see that the indicator will use more data here before it confirms the range. So, increasing this number by a bit can often be a good sign. You can also change the "Range Width". I generally just recommend to keep it at one. The "ATR Length", and the ATR is basically a measurement of volatility, and the standard number here is 500. And that will do for this video. You can also change, you know, a few style-related settings here, but I don't really have time to go too in depth on this indicator. But hopefully, this just gave you guys a little bit insight into it.
So, now the last but definitely not the least indicator we're going to take a look at is a premium indicator here on TradingView. Uh, and to find this indicator, what we want to do here, once again, we go up here to the indicators tab. And now we want to search for "All Chart Patterns". And the, the indicator we want to use here is called "All Chart Patterns", and it's built by TradingView. So, feel free to start this one. However, in order to get access, unfortunately, in order to get access to this indicator, you need TradingView Premium. And TradingView Premium is unfortunately not free. But I will make sure to leave a link both in the pinned comment and the description that you can use to try TradingView Premium for 30 days for free. And also, if you decide that you like TradingView Premium and want to upgrade later on, you will get a $15 bonus towards your new plan.
But now let's open up the indicator right here. And we need to wait for a while. And as you guys can see, when you first open up the indicator, it can look a little bit confusing. And that is because when we use the standard setting, this indicator will automatically show all chart patterns that are currently in the making. So, to change this, what we do here is that we go up to the settings tab for the indicator. And in order to only show the sort of confirmed patterns, we want to uncheck this setting right here, which says "In Progress". So, when you have this one checked, you will show all the patterns that are currently in making. If you uncheck this one, you will only show the recent confirmed patterns. So, if we now click OK here, you can see that this indicator automatically identified a rising wedge pattern here for Bitcoin. And you can also see here that the indicator automatically identifies the breakout. And one thing I really like about this indicator is that it will also give you an automatic target level for your trades.
And now let's actually go back here to the settings tab because here, if you scroll down a bit, you can see that you can choose between tons of different chart patterns here you want the indicator to automatically identify. So, let's say that you, for example, are only interested in double tops, double bottoms. You might not be interested in triple tops and triple bottoms. You might be interested in head and shoulders and inverse head and shoulders, but not in bull flags. So, here you can basically choose depending on your trading strategy. Perhaps you're focusing on only continuation patterns, or on only reversal patterns. So, you might choose all of the reversal patterns, or all of the continuation patterns, and so on and so on. So, here you can choose any patterns that you want this indicator to automatically identify. Here on the top setting, you can also choose between showing all patterns or only the last patterns, and so on and so on. And you also have different settings for targets. You can choose to have all targets, or if you want to create your own targets, you can choose no targets. Here, it's totally up to you.
But all right guys, so this course is coming to an end very, very soon. Uh, but before we wrap up, I want to thank you all so much for watching. And if you guys found any help or value in this video, it would be super, super awesome and helpful if you can show that by dropping a like on the video. It really helps out more than you think. And also, of course, if you got any questions about this course, or if you have any feedback, please don't hesitate to drop a comment down below. I try my very, very best to answer every single comment. And last but definitely not least, when you are ready to continue your trading journey, I highly, highly recommend all of you to check out this playlist right here. This is a YouTube playlist where you can find all the trading courses I have made so far, and I have tons of more coming. So, yeah guys, I hope to see you guys in another video very soon. But for now, take care. Ciao, ciao.